VC’s love to make fun of Europe. But here’s what most of them won’t tell you: they’re doing more investments there.

America innovates, China replicates, Europe regulates. Cue the picture of the bottle cap. I know, I make fun of Europe too!

But I’m also doing more investments there. And so are many of the big VC funds. So why are we putting more of our own cash into a region everyone derides as “mids”?

Behind the Scenes in My Portfolio

Out of my first 31 investments, only one was in Europe: Caribou in London. But my last two checks have been to European companies, and there will be many more to follow.

The most recent is Querio, a fantastic data analytics startup in London. The founder, Rami, is as intense and driven as any in the US.

The check before that was Recall, an incredible consumer startup. They make a tool to hold all the content you consume and query it any time, using AI.

When I saw Recall at an accelerator demo day, I was stunned by the quality of the product and the company’s growth. The team was *chef’s kiss*, straight out of Uber.

They’re based in Amsterdam. Was I going to let that stop me?

Heck no. Passing on that deal could cost me millions.

Talent

Everyone in America can practically taste the money that will come from AI.

Europe has some superb universities. We cannot afford to ignore this talent any longer. The potential rewards are just too great.

Western Europe also provides an environment that’s stable enough for that talent to build incredible companies. It may not be an ideal place for a startup to grow, but it works well enough.

Unfortunately, the same can’t be said for most of the developing world.

European Founders Want Us

European founders tell me American investors are highly sought after.

Saying “We have American investors” provides cachet in Europe. That’s true both with European investors and with potential customers.

European founders see American investors as a first choice.

We’re easy to deal with. We give you a clear yes/no. And we actually wire the cash.

Here’s a dirty little secret about some European “investors”: they don’t invest actual money. They want equity in exchange for some sort of “services,” whatever the heck those are.

Often, these “investors” are fronts for dev shops staffed by engineers in Eastern Europe. They try to grab equity in companies by posing as investors, only revealing the real deal later.

This is gross behavior. It would be unacceptable in America.

To be clear, there are some fantastic European investors as well. But alas, the fake investors are still out there.

Default Zoom

When everyone met in person in SF pre-Covid, it was hard for Europeans (or even Iowans) to get venture capital. Now, Zoom is the default.

When I talk to founders in YC, they’re all in SF. I’m in Jersey.

But they tell me all their meetings are on Zoom, even with SF investors. It’s the only way to do the zillion back-to-back calls they have on their calendar.

If a VC is meeting founders on Zoom, he may as well meet a few in London or Paris too.

What’s more, the European founders can sell American customers a lot more easily in a Zoom world. Those customers have deep pockets and make quick decisions.

A default Zoom world yields a European startup that looks pretty much like an American startup.

The founders speak superb English. Their customers are American. They’re even incorporated in Delaware.

If it’s got strong growth, why not throw a check into it?

Valuations

AI fever has led to obscene valuations in many American startups.

We’ve all seen the reports of seed rounds at $500 million. But what’s less discussed is how common seeds at $25 million have become.

It’s fine to do one of those occasionally. But if that’s your median entry price, it’s hard to make money.

Deals in Europe are much cheaper. Companies that would raise at $15-25 million post in America are raising at $6-8 in Europe.

That’s 2-3x the returns. Yum yum!

Wrap-Up

You always learn more paying attention to what people do, rather than what they say.

Right now with AI fever, America is riding high. Our stock market is blowing away the rest of the world. We’re feeling our oats.

But that fever has also made the seed market in America highly competitive. So, US investors are looking elsewhere.

Where do our eyes land? On the excellent startups across the pond that look more and more like American companies anyway.

Maybe it’s true that most Europeans are mids, maybe it’s not. But what’s the difference?

“Most people” are irrelevant. Billion dollar companies are always made by outlier human beings.

And there’s enough of them in Europe to keep us busy for a long time.

More on tech:

Meet My Latest Investment: Querio

Meet My Latest Investment: Recall

I’m About to Close the World’s Tiniest Venture Fund

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